Published On May 21, 2012
With all the great memories and highlights most college grads take with them following graduation day, there’s the ever-hovering inevitable waiting just 9 months after: student loan payments. These days, statistics show that once the 9-month grace period has passed, 1 out of 2 grads will either be underemployed or unemployed all together. The reality of even bumping the surface of that debt is slim to none, and the dream to pay it all off in 10 months or less seems absolutely absurd.
But it’s been done, recently. His name is Joe Mihalic; known as the man to go on a financial diet for 7 months and successfully erase more than $90,000 in college student loans. While most college graduates will not have the same availability to enough money to do the same, there’s more than one lesson to learn from this.
Mihalic’s story began in May 2009, when he graduated from Harvard Business School with an MBA. As the lucky one to be the first to score a job among his friends, he left to Austin, Texas to begin a job with DELL at twice as much as the 52K he was cashing in previously. [So, clearly, there’s money on deck here.]
But even with a 54K fellowship for Harvard, Mihalic accumulated up to $101,000 in loans. Still, he spent frivolously: he bought a 2004 BMA upon graduating; four nights a week he loosely spent for drinks, food, and entertainment with friends; on his 28th birthday he barhopped in and out of a stretch Hummer and found himself spending up to $7,000+ a month on entertainment and bills, minus his student loans. [yes, envious, but there’s a message coming].
But there was one place where he didn’t slough off. For 21 months straight, he dutifully made the monthly $1,057 payments on his student debt. It wasn’t until last summer, when he checked his balance, was he thrown into shock. After paying out more than $22,000, he still owed $90,717, a sum that exceeded his after-tax salary for a year. – Fortune
So he cut out all entertainment and frivolous spending. He detailed the experience on his blog, and summed it all up in the video below:
Now, obviously, the normal college graduate wouldn’t have the luxury to spend up to $7,000 a month on entertainment. The point here is this: no matter how much money you’re banking in on a monthly basis, from $1500-$4000, more or less, there is room for improvement. If you have a goal you’re dreaming of achieving, begin by challenging yourself to make it happen. Joe’s goal was to get rid of his student college debt. Maybe that’s not possible for you right now. Make a plan for yourself that could get you to the place to make it possible. Did you want to start your own company? Invest in real estate? Move to a better location? Or pay off other, smaller debts in your pocket? Do it.
Learn how to manage your money so that it’ll eventually be multiplying your pockets, not cutting them. Mihalic detailed his situation as follows:
Finally, there were definitely some contextual factors at play here. My income was higher than the average household income of $50k and I lived in a city that has a relatively low cost of living. I was also single and childless, so the lifestyle changes I made were generally victimless.
Looking back, I’d say that I was in the perfect situation to pay down my loan at an accelerated rate, and while my achievement might seem remarkable at first blush, I’d say the recipe, while not necessarily easy to follow, is fairly straightforward and likely adaptable to many other people’s situations.
The situation is adaptable, true, but not nearly to the extent in which he was able to profit. The last lesson here is also important, which may be running through your mind– ‘You mean to tell me that I would have to be making at least 6 figures a year to pay off my student loan debt in a loathing amount of time?’ Well, yes. And it’s a sad, depressing reality, but it’s something necessary to understand to know what’s best for you. Attempting to pay off this amount of money in 7 months on a 5-digit salary is impossible, unless you have other means to food, housing, and transportation.
So you could either take this story and mope around about how lucky this guy is, or take his advice and make it work for you in the way that you could benefit just as much on your terms. It’s all about adaptation and perserverance.